Category Archives: Trade

Consequences of a U.S.-China Trade War | RealClearWorld

China’s economy is still heavily reliant upon exports, especially exports to the United States. Diminished returns from free trade will put increased pressure on China’s already weakened economy, and the likelihood of civil unrest in the country will increase. China is a large economy, mostly by virtue of its population.  GDP per capita remains just below $8,000, and that GDP is not equally distributed, meaning the common Chinese has little wiggle room before economic contraction becomes catastrophic. Put simply, China can ill afford to reduce exports.

Trump’s victory reflects dissatisfaction with globalization in the United States. …

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China is thus faced with a “Hobson’s choice.” If Beijing attempts to accommodate American demands, it risks domestic unrest as its economy contracts. If China refuses to accommodate changes, then it risks a punitive American response, potentially producing a trade war it cannot afford. China cannot even threaten to cut off production access in the long term, as Washington could simply return to the TPP to fill that need.

Consequences of a U.S.-China Trade War | RealClearWorld

Serious Risks Of Trump Presidency For The Asian Economy

Just when China’s economy seemed to be stabilizing, Donald Trump’s election as U.S. president poses significant new risks. Not just for Chinese growth, but the entire Asia region.

That’s because the president-elect campaigned on a policy platform with protectionism at its center. Trump wants to slap punitive tariffs on Chinese goods and label the world’s No. 2 economy a currency manipulator.

Such a move would hurt Chinese exports. But it could also trigger a trade war if Beijing retaliates, catching other Asian economies in the crossfire.

Serious Risks Of Trump Presidency For The Asian Economy

China threatens to cut sales of iPhones and US cars if ‘naive’ Trump pursues trade war | World news | The Guardian

During the acrimonious race for the White House Trump repeatedly lashed out at China, vowing to punish Beijing with “defensive” 45% tariffs on Chinese imports and to officially declare it a currency manipulator.

On Monday the state-run Global Times warned that such measures would be a grave mistake.

“If Trump wrecks Sino-US trade, a number of US industries will be impaired. Finally the new president will be condemned for his recklessness, ignorance and incompetence,” the newspaper said in an editorial.

The Global Times claimed any new tariffs would trigger immediate “countermeasures” and “tit-for-tat approach” from Beijing.

China threatens to cut sales of iPhones and US cars if ‘naive’ Trump pursues trade war | World news | The Guardian

What a surprise! Who could have thought that China would retaliate over US tariffs?

I have always said that I hate trade with China. Obviously a trade war will bring problems in the short term, but ultimately the US will be better off not being dependent on a hostile nation. China, of course, will be in serious trouble over a trade war.

Globalization and its New Discontents by Joseph E. Stiglitz – Project Syndicate

Branko Milanovic’s new book Global Inequality: A New Approach for the Age of Globalization provides some vital insights, looking at the big winners and losers in terms of income over the two decades from 1988 to 2008. Among the big winners were the global 1%, the world’s plutocrats, but also the middle class in newly emerging economies. Among the big losers – those who gained little or nothing – were those at the bottom and the middle and working classes in the advanced countries. Globalization is not the only reason, but it is one of the reasons.

Under the assumption of perfect markets (which underlies most neoliberal economic analyses) free trade equalizes the wages of unskilled workers around the world. Trade in goods is a substitute for the movement of people. Importing goods from China – goods that require a lot of unskilled workers to produce – reduces the demand for unskilled workers in Europe and the US.

Globalization and its New Discontents by Joseph E. Stiglitz – Project Syndicate

Japan exports slump to financial crisis lows | Business | DW.COM

‘Disaster waiting to happen’

The latest data adds to growing concerns that Japanese authorities are increasingly left with few options to revive a stumbling economy even as the Bank of Japan remains proactive in policymaking, shocking markets last month by adopting negative interest rates to spark momentum.

The country’s
economy contracted an annualized 1.4 percent in October-December. While analysts expect a return to moderate growth in the current quarter, sluggish exports and weak consumer spending underscore the difficulty policy makers have in putting the economy back on track.

“Japan’s January trade figures were woeful… This is more fodder for those who think Japan’s economy is a disaster waiting to happen,” Chris Weston, Melbourne-based chief market strategist at IG, wrote in an email to clients.

Japan exports slump to financial crisis lows | Business | DW.COM | 18.02.2016

Review: Trade can bring war

The First World War taught that economic interconnections created national vulnerability. Economic self-sufficiency was seen as a potential solution. Autarky appealed to military strategists in both Nazi Germany and Japan in the 1930s – and was even supported at the time by that economic weather vane, John Maynard Keynes.

Among the war aims of both Germany and Japan was a desire to establish self-sufficient economic blocks. Yet Japan’s moves to construct its so-called “Greater Asia Co-Prosperity Sphere” threatened U.S. supplies of rubber and tin, and after Japan moved military forces into Indochina, America restricted Japan’s oil supplies. The Japanese replied in turn by bombing Pearl Harbor. “When the overlay of racial barbarity is removed from the Second World War,” writes Macdonald, “what remains is a struggle for resources.”

The rise of China, in Macdonald’s view, threatens to undermine America’s global hegemony and bring to an end the Pax Americana. The parallels with the rise of Imperial Germany over a century ago are worrisome, to say the least. Meanwhile, the antics of Putin’s revanchist Russia suggest historical analogues of a 1930s vintage, as the UK’s Prince Charles has imprudently observed.

When Globalization Fails” is a scholarly and readable account of how economic development and trade can exacerbate geopolitical tensions. It deserves to be read in the corridors of power, from Washington to Beijing. After all, the best hope of avoiding a repetition of past catastrophes lies in understanding how they came about.

Review: Trade can bring war

Connectiveness between countries means that problems can be transmitted more easily. And that just makes things worse. Note both that Russia and China have trade issues. Russia is being sanctioned by the West. China has to worry about America cutting it off.

When Globalization Fails: The Rise and Fall of Pax Americana – Amazon.com: Books

IS GLOBALIZATION AN UNINTENDED RECIPE FOR WAR?

Taking this question as its starting point, James Macdonald’s When Globalization Fails offers a rich, original account of war, peace, and trade in the twentieth century—and a cautionary tale for the twenty-first.

In the late nineteenth century, liberals exulted that the spread of international commerce would usher in prosperity and peace. An era of economic interdependence, they believed, would render wars too costly to wage. But these dreams were dashed by the carnage of 1914–1918. Seeking the safety of economic self-sufficiency, nations turned first to protectionism and then to territorial expansion in the 1930s—leading again to devastating conflict. Following the Second World War, the globalists tried once more. With the communist bloc disconnected from the global economy, a new international order was created, buttressing free trade with the informal supremacy of the United States. But this benign period is coming to an end.

According to Macdonald, the global commerce in goods is a mixed blessing. It makes nations wealthier, but also more vulnerable. And while economic interdependence pushes toward cooperation, the resulting sense of economic insecurity pulls in the opposite direction—toward repeated conflict. In Macdonald’s telling, the First World War’s naval blockades were as important as its trenches, and the Second World War can be understood as an inevitable struggle for vital raw materials in a world that had rejected free trade. Today China’s economic and military expansion is undermining the Pax Americana that had kept economic insecurities at bay, threatening to resurrect the competitive multipolar world of the early twentieth century with all its attendant dangers. Expertly blending political and economic history and enlivened by vivid quotation, When Globalization Fails recasts what we know about the past and raises vital questions about the future.

When Globalization Fails: The Rise and Fall of Pax Americana: James Macdonald: 9780374229634: Amazon.com: Books

Sanctions bind Russia’s energy elite to Putin | Reuters

Far from dividing those closest to President Vladimir Putin, they have forced the main players in the energy sector to rally behind him. This circle has by necessity become more focused, Western and Russian businessmen, diplomats and politicians said.

“They are defiant,” said a senior Western businessman who has access to some of the business and political leaders targeted by sanctions. He asked not to be identified because of the political sensitivity of the subject.

“The sanctions have brought consolidation and have made his inner circle only more dependent on him.”

The influence of more liberal thinkers in the government has been curtailed, sources close to decision-making say, including in the vital energy sector. The already small inner core of decision-makers has shrunk even further.

“We underestimated the Russian reaction,” said a Western envoy based in Moscow who spoke on condition of anonymity.

Sanctions bind Russia’s energy elite to Putin | Reuters

Why Sanctions on Russia Won´t Work Like Sanctions on Iran

“The United States, in turn, is looking to step up its own game. Policymakers are considering giving global companies a choice: stop providing long-term financing and energy assistance to major Russian companies or be kicked out of the U.S. financial system.”

With sanctions beginning to bite, Russia is starting to play a new economic game. To alleviate the pain of Western restrictions on its financial and energy sectors, Russia is turning for help to non-Western partners. Last week alone, Russia and China signed over 40 agreements that provide Russian firms with lines of credit worth billions of dollars and establish strategic partnerships in the energy sector.

The United States, in turn, is looking to step up its own game. Policymakers are considering giving global companies a choice: stop providing long-term financing and energy assistance to major Russian companies or be kicked out of the U.S. financial system. Such measures resemble the sanctions the United States placed on Iran a couple of years ago. But Iran was a different problem. And treating Russia the same way would be a mistake.

Sanctions can be an effective tool for forcing engagement and negotiation. But the pace and implementation must be tailored to the target. In the case of Iran, the United States was able to tighten the screws by pressuring foreign firms to stop dealing with the country. That move created some angry blowback, but it generally worked. And partially as a result, Tehran is at the negotiating table. When it comes to Russia, though, the political pushback that would come from blacklisting dealings with the strategic Russian energy and banking sectors would be much more severe because Russia is a more important market. Further, more companies would likely be willing to forego access to U.S. markets in order to continue working with the Russians. And that would undermine the sanctions’ effectiveness.

Eric Lorber and Elizabeth Rosenberg | Don’t Mistake Russia for Iran | Foreign Affairs

New EU Sanctions to Stop Fundraising by 3 Russian Oil Giants – WSJ

New European Union sanctions on Russia will expand the number of Russian companies unable to raise money in the bloc’s capital markets to include three major state-owned oil companies, according to documents seen by The Wall Street Journal.

Under a modest expansion of sanctions introduced in late July, the three oil companies— Gazpromneft, the oil-production and refining subsidiary of OAO Gazprom, oil transportation company Transneft, and oil giant Rosneft—will be forbidden from raising funds of longer than 30 days’ maturity.

The documents show the EU seeking to hit Russian oil companies, but leaving unscathed those involved in gas production and export, which are critical to many European countries’ energy supplies.

New EU Sanctions to Stop Fundraising by 3 Russian Oil Giants – WSJ

Will Putin cut off gas in return? What about just cutting it off during the winter?

Russia Economy In Trouble, Official Says

Not too long ago, top dogs within the Russian government said Western sanctions were not going to hurt. A couple of months later, reality has settled in.

Russia’s Economic Development Minister, Alexei Ulyukayev, said the economy had many obstacles and entered a negative growth cycle. In an op-ed published in the Vedomosti newspaper Monday, Ulyukayev wrote, “ It could be said that we have entered a negative stage of the economic cycle. Lack of demand is a significant obstacle on the way to restoring steady growth.”

Russia’s economy was slapped with sanctions from Brussels to Washington starting in March because of the country’s involvement with the ongoing civil unrest in eastern Ukraine. The sanctions began immediately after Russia annexed an important piece of Ukrainian real estate, the Crimea peninsula in the Black Sea, home to historic cities like Yalta and Russia’s Black Sea Fleet. Crimea, then an autonomous region of Ukraine, voted to secede following the toppling of the pro-Russia government in Kiev led by Viktor Yanukovych.

Russia Economy In Trouble, Official Says